The end of March, consumers were delighted to see the interest rate for the average home mortgage still at historically low levels. Most experts predict that the rates will slowly creep back up, but remain low for the rest of the year. Given the shaky state of the economy and the increase in unemployment, low rates have been the one shining light for those considering buying a new home with a home mortgage and, particularly, for those wishing to refinance. Lenders, however, have adopted much more stringent lending requirements since the credit crisis and decline of the real estate market. A better credit score, cleaner credit history and more money down are now required for most loans. That means that more home mortgage applicants than ever before are being turned down. Those who currently own homes and apply for refinancing must meet the same standards. Many lenders are now requiring at least 20 percent equity and a credit score of 700 or higher to qualify. The biggest hurdle for applicants in the areas of the country where values have dropped the most is having enough equity. One of the goals of the new government housing aid plan is to assist those responsible homeowners who no longer have enough equity, due to a decrease in the value of their homes. But those who owe more than 105 percent of the value of their home will not be eligible for a refinancing under the plan. A minimum of 5 percent is required in equity to apply for refinancing.
Some consumers think the home mortgage rates will decrease even more, so will wait to refinance until then. They may be right and snag an even lower rate in the future, or wish they would have grabbed the lower rates. As home values are predicted to continue to fall, homeowners who wait take on the risk that the equity in their homes may decrease if the values decline more. Consumers who wish to take advantage of the current low interest rates to refinance their home mortgage should do some simple calculations to determine if such a move makes sense for them financially. The first task is to add up how much the refinancing will cost. Many people simply look at the savings differential between their interest rate and the new lower rate and forget to consider the actual costs of refinancing. If you plan to continue to own the house after you recoup the costs and start benefiting from the monthly savings, it probably makes sense for you to refinance.

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by: marciafreeman
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